Will BoE Crypto Comments Fuel Recovery for Bitcoin & Co?

The Bank of England governor, Mark Carney, has called for a regulatory crackdown on Bitcoin; comments which can be expected to help fuel a sustainable recovery of the likes of Bitcoin, Ethereum, Ripple, Litecoin and Dash.

Mr Carney noted: “The time has come to hold the crypto asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities…In my view, holding crypto asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.”

Nigel Green, CEO of the deVere Group had this to say: “The proactive and pragmatic approach now being taken by the BoE should be championed.

“An increasing number of people are becoming aware of and developing an interest in cryptocurrencies. Whether traditionalists like it or not, cryptocurrencies in some form or another are here to stay – and the market is only set to grow.

“Robust regulation will help protect both retail and institutional investors, help combat cryptocurrency criminality, and reduce the potential threat of disrupting global financial stability, as well as offering a possible long-term economic boost to those countries which introduce it.

“The Bank of England is one of the world’s most influential central banks and, as such, its approach is likely to help shape the policies of others.

“Strong regulatory frameworks will give investors even more protection and more confidence in the market and, with this in mind, the comments by the BoE Governor on the regulation of cryptocurrencies can be expected to help fuel a sustainable recovery of the likes of Bitcoin, Ethereum, Ripple, Litecoin and Dash.

“Regulation bolsters certainty, credibility and legal assurance. This translates into confidence and, typically, therefore a long-term upward trend. We saw that this was the case for Bitcoin in Japan when Tokyo started regulating the token. The market dropped at first, but eventually it rose. The same thing happened in Australia.”

In addition, Jacob Ghanty, Financial Regulatory Partner at Kemp Little said: “Cryptocurrencies are still in a massive growth phase and this is unlikely to slow down anytime soon. But as this statement from Mark Carney shows, cryptocurrencies are facing regulatory headwinds. Despite Bitcoin being largely unregulated in the UK today, there is ‘backdoor’ legislation helping to regulate the market – such as anti-money laundering (AML) laws. Further regulation is required to protect those who have invested in the cryptocurrency against theft or loss.

“If a clearing bank, for example, goes bankrupt, consumers’ deposits up to £75k are protected. But, because the cryptocurrency market is not regulated there is no protection. As a Bitcoin investor, should your account be hacked, you’d hope the institution that holds your currency would have a back-up service provider in place to recreate the record. However, as this does not exist, there are no such protections in place – unlike having cash in a current account or ISA, which would be protected.

“Unlike IPOs, ICOs are not heavily regulated and need to be approved by many parties. The Ethereum network’s ICOs alone have apparently resulted in considerable phishing, Ponzi schemes, and other scams, accounting for about 10% of ICOs. This is a result of there being very little information provided (such as track records), and no real proof of concept. The lack of regulation of ICOs means that this information isn’t provided which leaves investors in the dark. China and South Korea have already banned ICOs due to a high proportion of them being seen as untrustworthy or likely to mislead investors or potential investors.

“What form might regulation take in this area? Traditional so-called ‘fiat’ currencies aren’t regulated currently as financial products as such. They are regulated only indirectly in the sense that institutions holding them (deposit takers or banks) or transferring them (payment service providers) must be licensed. So it would seem imbalanced if crypto currencies were regulated as a product type. What’s more likely is the regulation of ICOs- it might be possible to bring these within the scope of laws governing securities offers and trading, which in a sense demonstrates a line of thinking that crypto currencies are more of an investment product to be held with the hope of achieving gains, rather than a means of exchange.”